In the present study, we demonstrated that human skin cancers frequently overexpress TGF-β₁ but exhibit decreased expression of the TGF-β type II receptor (TGF-βRII). To understand how this combination affects cancer prognosis, we generated a transgenic mouse model that allowed inducible expression of TGF-β₁ in keratinocytes expressing a dominant negative TGF-βRII (ΔβRII) in the epidermis. Without ΔβRII expression, TGF-β₁ transgene induction in late-stage, chemically induced papillomas failed to inhibit tumor growth but increased metastasis and epithelial-to-mesenchymal transition (EMT), i.e., formation of spindle cell carcinomas. Interestingly, ΔβRII expression abrogated TGF-β₁–mediated EMT and was accompanied by restoration of membrane-associated E-cadherin/catenin complex in TGF-β₁/ΔβRII compound tumors. Furthermore, expression of molecules thought to mediate TGF-β₁–induced EMT was attenuated in TGF-β₁/ΔβRII–transgenic tumors. However, TGF-β₁/ΔβRII–transgenic tumors progressed to metastasis without losing expression of the membrane-associated E-cadherin/catenin complex and at a rate higher than those observed in nontransgenic, TGF-β₁–transgenic, or ΔβRII-transgenic mice. Abrogation of Smad activation by ΔβRII correlated with the blockade of EMT. However, ΔβRII did not alter TGF-β₁–mediated expression of RhoA/Rac and MAPK, which contributed to increased metastasis. Our study provides evidence that TGF-β₁ induces EMT and invasion via distinct mechanisms. TGF-β₁–mediated EMT requires functional TGF-βRII, whereas TGF-β₁–mediated tumor invasion cooperates with reduced TGF-βRII signaling in tumor epithelia.